costs budgeting

What to include in a costs budget

By on Aug 14, 2019 | 6 comments

I have seen a number of Precedent H costs budgets which include, within the ADR/Settlement phase, the anticipated court fee for the Consent Order recording the settlement agreement. Is this correct? Costs budgets are predicated on the basis that the matter will proceed to a final trial. That is why there is a Trial phase. The total figure for the budget therefore reflects the anticipated costs that will be incurred if the matter does not settle and proceeds all the way to trial. Given that is clearly correct, surely the court fee for a Consent Order should not be included. On the other hand, the Guidance Notes on Precedent H include, under examples of the work to be included within the Settlement phase: “Drafting settlement agreement or Tomlin order” That would therefore suggest that any corresponding court fee should indeed be included. What happens then if a budget is approved/agreed that includes the court fee but the matter does not settle before trial? On detailed assessment, does the fact that one of the assumptions on which the budget was prepared (that the matter would settle within the ADR/Settlement phase) did not occur mean that there is a “good reason” to depart downwards from the budget? If so, to what extent? For example, a claimant’s budget is prepared estimating, for the ADR/Settlement phase, £2,000 profit costs and £100 consent order fee. The budget is approved as drafted. Negotiations are unsuccessful and so no settlement agreement or Tomlin order is drafted and no consent order is filed. The claim succeeds at trial. The claimant serves a bill claiming exactly £2,100 profit costs. The court’s approval of the budget will “relate only to the total figures for budgeted costs of each phase of the proceedings” and the approved figure would have been a global total of £2,100, which the receiving party has not exceeded. As per HHJ Dight CBE in Barts Health NHS Trust v Salmon [2019]: “it seems to me that the fact that the phase of the budget relating to experts was … substantially incomplete was capable of being a good reason, and it would have been open to the Master on that basis to consider whether to reduce the...

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New Precedent R costs budget discussion report

By on Feb 28, 2019 | 1 comment

A new Precedent R costs budget discussion report form has been produced that will come into force from 25 April 2019 (last page here). In terms of changes to the current version: The form now includes incurred costs. This may, in part, have been to avoid confusion as to what figures were meant to be inserted into the “Claimed” column.  I suspect the main reason was to emphasise that the court is meant to take into account incurred costs when considering the reasonableness and proportionality of all budgeted costs (as per PD 3E para.7.4). I am somewhat struggling to understand the final three columns on the form. Column K is presumably for the judge to insert the total that is being allowed for future budgeted costs.  Columns L and M appear to be designed, in part, for the judge to insert comments on the costs claimed/allowed.  This certainly makes sense in relation to commenting on incurred costs and is precisely what PD3E para.7.4 envisages.  It can also be very helpful if a judge makes comments on the reasoning behind the estimated costs allowed.  At detailed assessment, comments on the reasoning behind the figures allowed can greatly assist when determining whether there is a good reason for departing upwards or downwards from the budget.  However, columns L and K are split between “Time (hours)” and “Disbursements”.  This appears to run the risk of encouraging judges to focus on the “constituent elements” of the budget rather than, as per PD3E para.7.3, the “total figures for budgeted costs of each phase of the proceedings”. The “summary” box at the bottom of the form refers to “Post CCMC costs summary”. This appears to be predicated on the basis that the costs of the actual CCMC will be included under “Incurred costs”.  This may help solve the problem of where to include the CMC/CCMC work within Precedent H.  At the time the budget is completed this work (or at least the majority) will be estimated but by the time the budgets are actually approved will have been work that has been completed (and thus incurred).  Hopefully, the Guidance Notes to Precedent H will be updated to clarify this.    ...

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Costs of completing Precedent H

By on Feb 4, 2019 | 4 comments

The front page of the Precedent H form for costs budgets has a section at the bottom for completion of the costs of the costs budgeting process: Approved budget - Budget drafting 1% of approved budget or £1,000 - Budget process 2% - I routinely see budgets served where this part of the form has been completed, calculated by reference to 1% or 2% of the total of the budget as drafted (incurred plus estimated costs).  This is plainly incorrect. PD 3E para.7.2 states: “Save in exceptional circumstances- (a)    the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted costs (agreed or approved); and (b)    all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted (agreed or approved) costs.” The first point to note is that the 1% and 2% figures are caps.  There is no automatic entitlement to these amounts.  To get the full amount of the cap, it must be shown that reasonable work on the relevant task was undertaken that equals or exceeds the cap. Secondly, the fact that the part of the % that relates to incurred costs is calculated by reference to the amount eventually “agreed or allowed on assessment” means that at the time the budget is drafted (and at the time of the costs management hearing) it is completely unknown what figure will eventually be agreed or assessed in respect of incurred costs.  This will only be discovered at the conclusion of the claim once the other costs have actually been agreed/assessed.  It is therefore not possible to calculate the 1% or 2% figure at that stage as the amount used to calculate the figure has not yet crystallised. Thirdly, even in respect of the estimated future costs, at best it is simply wishful thinking to believe that because the estimated future costs are £x that this amount will be approved in full.  Any reduction by the court in respect of estimated costs will lead to a corresponding reduction in the...

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Defective costs budgets

By on Oct 29, 2018 | 1 comment

The decision of Mr Justice Walker in Page v RGC Restaurants Ltd [2018] EWHC 2688 (QB) provides further important guidance on the costs budgeting process and is essential reading for those involved in costs budgeting. The underlying case was subject to costs budgeting.  The parties decided between themselves, without consulting the Court, that the budgets could be prepared on the basis that it was too soon to budget for trial preparation and trial costs.  The Claimant’s budget therefore included nothing for these phases. The main rule in issue was CPR 3.14: “Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees.” At the CCMC, the master concluded that the failure to serve a budget that included trial preparation and trial estimates amounted to a failure to file a budget that complied with the rules.  He decided that the consequence of this was that the CPR 3.14 sanction applied and made a costs management order limiting the Claimant’s budget accordingly (ie court fees only). On appeal, the master’s decision that there had been a failure to file a compliant budget was upheld.  However, the appeal judge ruled that the master should have gone on to consider whether to disapply the sanction (even in the absence of an application for relief from sanctions) as CPR 3.14 specially provides that the sanction applies “unless the court otherwise orders”.  The judge then applied the Denton principles to the issue of whether the court should have otherwise ordered and did so to the extent that the sanction would not be applied to those phases of the budget that had been properly completed and agreed by the Defendant.  However, the sanction would continue to apply in relation to the trial preparation and trial phases.  Given the matter had been listed for a five day trial, this represents a very serious sanction and is likely to cause a major loss to the Claimant’s solicitors (or possibly professional indemnity insurers) if the matter proceeds to trial. The obvious lesson from this decision is that it is not for parties to decide not to file...

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